Nippon Oil Corp. said Wednesday it agreed to form a refining venture with PetroChina Co., expanding their alliance to capture growing Asian demand.
The companies will consider jointly operating Nippon Oil's 115,000-barrel-a-day refinery in Osaka as part of the venture, Nippon Oil President Shinji Nishio told reporters. The venture, in which Japan's largest refiner will hold a 51 percent stake, will probably start up by next April, he said.
Nippon Oil and PetroChina are working together to expand in Asia and use the Japanese refiner's surplus capacity. Demand is waning in Japan but increasing elsewhere in Asia as emerging economies, such as China, consume more oil products.
Under an agreement signed Wednesday, Nippon Oil will operate the Osaka plant while PetroChina will handle the purchase of crude oil and sales of refined products.
PetroChina approached Nippon Oil last year to form the oil-processing venture as part of plans to secure refined products and acquire technology to operate plants efficiently, Nippon Oil's Nishio said.
"This could be a leading model in the future for cooperation" between Japanese and overseas refiners, he said. "Demand in Japan is set to decline about 3 percent annually from now."
Japanese businesses and households are shifting to natural gas and other fuels because of rising oil prices and environmental concerns. Oil climbed to a record $122.73 a barrel in New York on Tuesday and is up 98 percent from a year ago.
Refined oil-product demand in Japan dropped 2.4 percent in the year ended March 31, according to the Ministry of Economy, Trade and Industry, exceeding an earlier forecast of 1.8 percent a year to March 2012.
Nippon Oil said April 2 it will process 40 percent more oil for PetroChina International Ltd., a unit of China's biggest oil producer, in the year ending next March 31. It will process 70,000 barrels a day, up from 50,000.